Connect with us

Why Sovereign Wealth Funds Love Real Estate

Published

on

Despite Norway’s sovereign wealth fund having a hard time finding suitable properties in Tokyo and in other core Asian cities, sovereign investors in the aggregate have steadily put capital to work in real estate. Even micro sovereign funds like the one owned by the Republic of Nauru, has ownership in Houston office real estate.

The low-yield environment has been a defining factor on why sovereign funds invest directly into real estate or property funds. The decade-long subtle manipulation of interest rates to stave off a global depression has forced cash-rich sovereign funds to park money into these concrete towers in central business districts. These mega institutional investors, some smaller in assets, continue to seek out experienced real estate partners to deposit their capital in niche deals. Whether its Gulf funds like the Qatar Investment Authority involved with the Empire State Building or Hudson Yards, or the Norway Government Pension Fund Global’s all-encompassing European logistics partnership, the demand for suitable institutional real estate in developed market appears to remain valid.

According to data from the Sovereign Wealth Fund Transaction Database, which tracks direct transactions made by sovereign funds, pensions and other public funds, wealth funds directly invested a staggering US$ 31.2 billion into the real estate sector versus US$ 12.3 billion in 2011. This stark contrast demonstrates three important points. First, more wealth funds are going direct or participating in co-investments. This means sovereign investors are seeking partners whether they are real estate firms, developers, pensions, life insurance companies, real estate investment trusts or wealthy family offices. For example, the GIC had formed a joint venture with affiliates of Boston-based Beacon Capital Partners, LLC to swoop up a portfolio of Washington D.C. metro properties that included the Lafayette Center complex.

California Love

Sovereign wealth is attracted to the Golden State over its diverse terrain, demographics, entertainment industry and being a global hub for innovation (San Francisco Bay Area). The Qatar Investment Authority (QIA) has been aggressive in wanting to invest in California institutional real estate. The QIA wanted to outright acquire a portfolio of offices owned by The Blackstone Group, in which the private equity firm became the owner in part of its 2007 acquisition of Equity Office Properties Trust. The QIA ended up partnering with Douglas Emmett, Inc., a real estate investment trust, to acquire these office properties once they hit the market such as 12100 Wilshire Boulevard, 233 Wilshire Boulevard and 1299 Ocean Avenue.

Going into 2017, it appears wealth funds continue to seek out high-quality real estate assets to help diversify their portfolios.

Student Housing and the Resiliency of the Education Sector

Hotels and resorts can be corrosive investments in downward economies, while the U.S. education sector has been resilient, even during the global financial crisis back in 2008. Some sovereign funds have found success in student housing. GIC Private Limited has constructed a portfolio of student housing in Australia, the United Kingdom and the United States, betting on ever-growing education sector. In March 2017, the GIC entered into a venture with the Canada Pension Plan Investment Board (CPPIB) and The Scion Group LLC, to invest and oversee a massive portfolio of student housing assets in the United States. The GIC also has a U.K. student housing venture with Unite Group Plc.

Going into 2017, it appears wealth funds continue to seek out high-quality real estate assets to help diversify their portfolios. The excessive demand from sovereign wealth funds and other real estate players have caused many pensions and real estate private equity shops to be net sellers so far in 2017. This recycling of capital has been a boon for real estate investment firms.

Ascendas-Singbridge Acquires Three Hotels in Osaka

Published

on

Singapore’s Ascendas-Singbridge has acquired three hotels in Osaka for 10.29 billion JPY to tap tourism growth in Japan’s third-largest city.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

BlackRock Contemplates Stake in Eurizon

Published

on

Asset management giant BlackRock is contemplating purchasing a 30% ownership stake in Intesa SanPaolo’s asset management unit called Eurizon Capital SGR S.p.A. BlackRock is keen on growing its technology business and increase market adoption of its Aladdin platform.

Intesa has been working with UBS to seek out strategic options for Eurizon. Intesa is keen on maintaining control over Eurizon.

Continue Reading

SWFI First Read, June 22, 2018

Published

on

JPMorgan Fund Buys 40% of Oxford Properties’ French Portfolio

A fund advised by JP Morgan Asset Management committed €400 million in Oxford Properties’ French portfolio. Essentially, Oxford Properties sold a 49.9% non-managing interest in 32 Rue Blanche, 92 Avenue de France and Paris Bastille. Oxford Properties made its maiden investment in Paris in 2014 when it acquired 32 Rue Blanche.

Oxford Properties is the real estate unit of OMERS.

Temasek Explores Further Cash Commitments to FirstCry

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.